Fed decides to keep interest rates unchanged due to inflation concerns

On May 7 (US time), the US Federal Reserve (Fed) decided to keep the basic interest rate at 4.25-4.5% after a 2-day policy meeting. This interest rate has been maintained since the end of last year.

In its policy statement, the Fed said the US economy continued to grow steadily despite recent fluctuations. The Fed said the first-quarter GDP decline was mainly due to businesses and households increasing imports to "avoid" new tariffs, rather than a sign of internal weakness.

The agency also stressed that the labor market remained strong, while inflation remained "high" - a familiar phrase that has appeared in previous statements.

Fed Chairman Jerome Powell at a press conference on May 7 (Photo: Reuters).

However, unlike previous policy announcements, the Fed this time sounded the alarm about new risks that are brewing, which could force policymakers to face difficult choices in the coming time.

"The economic outlook has become increasingly uncertain. The Federal Open Market Committee (FOMC) is monitoring developments closely and assesses that risks to both inflation and unemployment have increased," the statement stressed.

The Fed highlighted risks of higher inflation and rising unemployment, further clouding the outlook for U.S. economic growth as policymakers grapple with the impact of President Donald Trump’s tariffs.

Fed Chairman Jerome Powell acknowledged at a press conference that it is unclear whether the US economy can maintain steady growth or will falter in the face of growing uncertainties and the possibility of inflation.

Mr. Powell also dismissed the idea that the Fed would cut interest rates soon to prevent risks, as inflation continues to exceed its target. "Right now, it's unclear what will happen. We can't say what the appropriate monetary policy response would be, because it's really unclear what we should do at this point," Powell said frankly.

The Fed has maintained a "sit-still" stance since its last rate cut in December, waiting to fully assess the impact of tariff policies.

The Fed chairman noted that trade negotiations between the US and important partners could have a material impact on the economic outlook, especially after Trump imposed higher-than-expected tariffs, even surprising the Fed itself.

“It appears we are entering a new phase where the administration is starting to negotiate with a number of important trading partners. That may or may not change the landscape significantly,” Powell said.

The Fed's decision to keep interest rates unchanged is expected to prompt US President Donald Trump to continue to urge the agency to lower interest rates. Most recently, on May 2, right after the US Department of Labor released the April employment report with results that exceeded expectations, Mr. Trump once again emphasized his desire for the Fed to loosen monetary policy.

Analysts say the White House wants to cut interest rates to reduce the negative impact of the import tariffs that the Trump administration is pursuing. However, Fed Chairman Jerome Powell remains cautious, rejecting the idea of ​​cutting interest rates early because of concerns that it could fuel inflationary pressures.

Source: https://dantri.com.vn/kinh-doanh/fed-quyet-dinh-giu-nguyen-lai-suat-do-lo-ngai-lam-phat-20250508064137927.htm